Under the Corporations Act 2001, creditors have to power to issue a demand over any provable debt greater than $2,000. This demand is called a Creditors Statutory Demand and is issued using form 509H.
A company who is served with a Creditors Statutory Demand has a period of 21 days to either:
If the company does not comply with the demand, then under section 459C(2)(a) of the Corporations Act 2001 the company is deemed insolvent. The insolvent company is then at risk of the court appointing a liquidator to commence winding up procedures.
You have time to pay the claim of the creditor. Try to offer a payment deal sensibly before the action will be heard in the court. Be careful to get the creditor to agree to set the demand notice aside in writing.
If you cannot pay the debt then you should look at our page Is my company insolvent? or if you are already convinced your company is insolvent then Ask IRA! what your options are.
If the above advice has not answered your questions you might want to review the following pages and downloadable Information Sheets:
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